Business activity in India extends a streak of robust growth in August, Reuters PMI shows

By Indradip Ghosh

BENGALURU (Reuters) – India’s business activity extended its period of robust growth in August as a stronger services industry offset a slight slowdown in manufacturing expansion, according to a survey that indicated price pressures were also easing .

These findings suggest that India will retain its title as the fastest-growing major economy in the coming quarters, despite expectations of a slowdown in the global economy.

HSBC’s India Composite Purchasing Managers’ Index, compiled by S&P Global, fell slightly to 60.5 in July from last month’s final reading of 60.7, in line with a Reuters poll forecast.

August marked more than three years of expansion, the longest such period since June 2013. The 50 level separates growth from contraction.

“India’s flash composite PMI eased slightly in August, although it remained significantly higher than the historical average,” noted Pranjul Bhandari, HSBC’s chief economist for India.

“Although new orders growth for the manufacturing sector slowed to the weakest since February, the pace of expansion remained sharp, indicating continued strong demand and favorable market conditions.”

The flash services PMI rose to 60.4 this month from 60.3 in July, while a preliminary manufacturing PMI showed strong growth, albeit slightly weaker than last month. It fell to 57.9 from 58.1.

Although global demand growth slowed to a three-month low in August, it remained robust. However, exports expanded at the slowest pace since April, pointing to weak global demand.

General input costs rose at their slowest pace since February, and output prices rose at a slower pace than last month.

Even so, prices for manufactured goods rose at the fastest rate in 11 years.

India’s retail inflation fell to a near five-year low in July, largely due to a high base effect, suggesting the slower pace of price growth was temporary and the Reserve Bank of India needs to be cautious.

Concerns about inflation and competition led to business confidence for the next 12 months falling in August.